SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

    [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
                                   Act of 1934

                        For Quarter Ended: June 30, 2004

                                       OR

     [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                         Commission File No. 000-3084133

                                 BLUETORCH  INC.
                                 ---------------

             (Exact name of registrant as specified in its charter)


         Nevada                                             90-0093439
----------------------------                        ------------------------
 (State  of  Incorporation)                            (I.R.S.  Employer  I.D.)


                         12607 Hiddencreek Way, Suite S
                               Cerritos, CA 90703
                            Telephone (562) 623-4040
          (Address and telephone number of principal executive offices
                        and principal place of business)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12 months (or for such a period that the registrant was required
to  file such reports), and (2) has been subject to such filing requirements for
the  past  90  days.  Yes  [X]  No  [  ]

As  of  August  19,  2004,  the  registrant had a total of 257,880,252 shares of
common  stock  issued  and  outstanding.


<TABLE>
<CAPTION>



                         BLUETORCH  INC.
                    CONDENSED  BALANCE  SHEETS
<S>                                                                  <C>              <C>
                                                                     June 30, 2004    December 31, 2003
                                                                     ---------------  -------------------
                                                                         (Unaudited)
ASSETS

  Investments in portfolio companies. . . . . . . . . . . . . . . .  $    1,161,054   $          559,405
  Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          35,354                  517
  Property & equipment, net . . . . . . . . . . . . . . . . . . . .          34,084
  Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           5,557                    -
                                                                     ---------------  -------------------

                                                                     $    1,236,049   $          559,922
                                                                     ===============  ===================


        LIABILITIES  AND  STOCKHOLDERS'  EQUITY

Current liabilities
  Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . .  $       86,183   $          106,156
  Loans payable, related parties. . . . . . . . . . . . . . . . . .               -               26,000
                                                                     ---------------  -------------------

          Total current liabilities . . . . . . . . . . . . . . . .          86,183              132,156
                                                                     ---------------  -------------------

Stockholders' equity
  Preferred series B, $.001 par value; 190,000 shares issued
    and outstanding . . . . . . . . . . . . . . . . . . . . . . . .             190                  480
  Preferred series C, $.001 par value; 10,000,000 shares issued
    and outstanding . . . . . . . . . . . . . . . . . . . . . . . .          10,000               10,000
  Common stock, $.001 par value;950,000,0000 shares
    authorized; 243,505,252 and 190,372,632 shares issued and
    outstanding at June 30, 2004 and December 31, 2003 respectively         243,505               54,277
  Common stock subscriptions receivable . . . . . . . . . . . . . .         (18,750)            (112,500)
  Additional paid in capital. . . . . . . . . . . . . . . . . . . .       6,785,560            5,844,055
  Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . .      (5,870,639)          (5,368,546)
                                                                     ---------------  -------------------

          Total stockholders' equity. . . . . . . . . . . . . . . .       1,149,866              427,766
                                                                     ---------------  -------------------

                                                                     $    1,236,049   $          559,922
                                                                     ===============  ===================
The  accompanying  notes  form  an  integral part of these financial statements.


</TABLE>

<TABLE>
<CAPTION>

                                            BLUETORCH  INC.

                                 CONDENSED  STATEMENTS  OF  OPERATIONS
                                                   (Unaudited)


<S>                                  <C>              <C>              <C>              <C>

                                     For The          For The          For The          For The
                                     Three Months     Three Months     Six Months       Six Months
                                     Ended            Ended            Ended            Ended
                                     June 30, 2004    June 30, 2003    June 30, 2004    June 30, 2003
                                     ---------------  ---------------  ---------------  ---------------


Income. . . . . . . . . . . . . . .  $            -   $            -   $            -   $            -
                                     ---------------  ---------------  ---------------  ---------------

Expenses -
  General and administrative. . . .        (230,630)      (1,112,050)        (502,094)      (1,531,201)

  Cost associated with cancellation
     of options . . . . . . . . . .               -       (2,784,600)               -       (2,784,600)
                                     --------------   --------------   ---------------  ---------------
          Total expenses. . . . . .        (230,630)      (3,896,650)        (502,094)      (4,315,801)
                                     ---------------  ---------------  ---------------  ---------------

Net loss. . . . . . . . . . . . . .  $     (230,630)  $   (3,896,650)  $     (502,094)  $   (4,315,801)
                                     ===============  ===============  ===============  ===============


Basic and diluted - loss per share.  $        (0.00)  $        (0.02)  $       (0.00)   $       (0.03)
                                     ===============  ===============  ===============  ===============

Weighted average common shares -
  basic and diluted . . . . . . . .     236,305,252      170,655,998      226,095,952      171,338,347
                                     ===============  ===============  ===============  ===============
The  accompanying  notes  form  an  integral part of these financial statements.

</TABLE>

<TABLE>
<CAPTION>

                                               BLUETORCH  INC.

                             SCHEDULE  OF  INVESTMENTS  IN  PORTFOLIO  COMPANIES


<S>                                 <C>             <C>             <C>         <C>         <C>  <C>
                                                    June 30, 2004


                                    Description     Percent                     Fair
Company. . . . . . . . . . . . . .  of Business     Ownership       Cost        Value            Affiliation

Unboxed Distribution, Inc. . . . .  Extreme Sports     100%         $  843,573  $  843,573  (1)  Yes
                                    Apparel

Total Sports Distribution, Inc.. .  Extreme Sports     100%         $  317,481  $  317,481  (1)  Yes
                                                                    ----------  ----------  ---
                                    Apparel

Investments in Portfolio Companies                                  $1,161,054  $1,161,054
                                                                    ==========  ==========


<FN>

     (1)  Fair  value was determined by the  Company's  Board  of  Directors  based  on  the  actual
          cost  of  investment. See  also  Note  2  for  further  explanation  on  the  Company's  methods
          of  determining  fair  values.
</TABLE>

<TABLE>
<CAPTION>

                                     BLUETORCH   INC.

                               STATEMENTS  OF  CASH  FLOWS

                     FOR  SIX  MONTHS  ENDED  JUNE  30, 2004 and 2003
                                       (Unaudited)


<S>                                                             <C>          <C>
                                                                      2004          2003
                                                                -----------  ------------


Cash flows from operating activities:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .  $ (502,094)  $(4,315,801)

  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Costs associated with converting stock at a discount. . .           -       166,101
     Legal and other expense associated with stock issuance. .       5,345             -
     Shares issued for settlement of interest on Series B. . .      50,000             -
     Depreciation and amortization expense . . . . . . . . . .       2,450             -
     Write off of notes payable. . . . . . . . . . . . . . . .     (14,000)            -
     Stock Issued for employee compensation/services . . . . .           -       328,662
     Stock Issued for debt conversion costs. . . . . . . . . .           -        78,750
     Series C Preferred shares issued in exchange for services           -       367,500
     Notes and loans payable issued for services . . . . . . .           -       413,000
     Costs associated with cancellation of options . . . . . .           -     2,784,600

  Changes in operating assets and liabilities:

      Deposits . . . . . . . . . . . . . . . . . . . . . . . .      (5,557)            -
      Accounts payable . . . . . . . . . . . . . . . . . . . .     (19,973)       74,049
      Loans payable. . . . . . . . . . . . . . . . . . . . . .     (12,000)            -
      Deposits payable . . . . . . . . . . . . . . . . . . . .           -       (10,000)
                                                                -----------  ------------


          Net cash used in operating activities. . . . . . . .    (495,829)     (113,139)
                                                                -----------  ------------

Cash flows from investing activities:
     Purchases of Fixed Assets . . . . . . . . . . . . . . . .     (36,534)            -
     Payments advanced to portfolio investment companies . . .    (601,649)            -
                                                                -----------  ------------

          Net cash used in investing activities. . . . . . . .    (638,183)            -
                                                                -----------  ------------

Cash flows from financing activities:
    Proceeds from issuance of common stock . . . . . . . . . .   1,198,849        62,819
    Purchase of Series B preferred stock . . . . . . . . . . .     (30,000)            -
    Issuance of convertible debentures . . . . . . . . . . . .           -        25,000
    Proceeds of notes payable. . . . . . . . . . . . . . . . .           -        40,000
                                                                -----------  ------------

          Net cash provided by financing activities. . . . . .   1,168,849       127,819
                                                                -----------  ------------

Net increase in cash . . . . . . . . . . . . . . . . . . . . .      34,837        14,680
Cash - beginning of period . . . . . . . . . . . . . . . . . .         517           912
                                                                -----------  ------------

Cash - end of period . . . . . . . . . . . . . . . . . . . . .  $   35,354   $    15,592
                                                                ===========  ============
The  accompanying  notes  form  an  integral part of these financial statements.

</TABLE>




                        NOTES TO THE FINANCIAL STATEMENTS

(1)  Description  of  Business

                            ORGANIZATION AND BUSINESS

Mercury Software, a Nevada corporation, was incorporated on January 29, 1997 and
its  name was changed to MedEx Corp. on June 24, 2002. Aussie Apparel Group Ltd.
("Aussie  Apparel"  or "the Company"), a Nevada corporation, was incorporated on
August  26,  2002. In October 2002, MedEx Corp. issued an aggregate of 6,500,000
(pre-stock  split) shares of its common stock to the shareholders of the Company
in  connection  with  the merger of the Company with MedEx Corp., whose name was
then  changed  to  "Aussie  Apparel  Group  Ltd"  on October 21, 2002. Since the
shareholders  of  the Company became the controlling shareholders of MedEx after
the  exchange,  the Company was treated as the acquirer for accounting purposes.
Accordingly,  the  financial  statements  as  presented  here are the historical
financial  statements  of the Company and include the transactions of MedEx only
from  the  date  of  acquisition,  using  reverse  merger  accounting.

The  Company's  name  was  changed  to  Bluetorch  Inc.  ("Bluetorch") effective
November  3,  2003.

On  June  19,  2003, the Company became a "Business Development Company" ("BDC")
pursuant  to  applicable  provisions  of the Investment Company Act of 1940 (the
"Investment  Company  Act").

Until  June  19,  2003  the Company was a development stage enterprise under the
provisions  of  Statement of Financial Accounting Standards ("SFAS") No. 7. Upon
commencing  their operations as a BDC, the Company no longer qualified under the
guidelines  of  SFAS  No.  7.

Based  on  the Company's integration and management strategies, the Company will
operate  on a non-consolidated basis. Operations of the portfolio companies will
be  reported  at the subsidiary level and only the appreciation or impairment of
these  investments  will  be  included  in  the  Company's financial statements.

                         CONDENSED FINANCIAL STATEMENTS

The  accompanying financial statements have been prepared by the Company without
audit.  In the opinion of management, all adjustments (which include only normal
recurring  adjustments) necessary to present fairly the financial position as of
June  30,  2004,  and  the  results of operations and cash flows for all periods
presented  have  been  made.

Certain  information  and  footnote  disclosures  normally included in financial
statements  prepared in accordance with accounting principles generally accepted
in  the  United Sates of America have been condensed or omitted. It is suggested
that  these  condensed  financial  statements  be  read  in conjunction with the
financial  statements  and  notes thereto included in the Company's December 31,
2003,  audited  financial statements on Form 10-K. The results of operations for
the  periods  ended June 30, 2004 and 2003 are not necessarily indicative of the
operating  results  for  the  full  years

                                  GOING CONCERN

The  accompanying  financial  statements  have  been prepared in conformity with
accounting  principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. As of June 30, 2004,
the  Company  has  generated  no  revenues  and  has  incurred  losses  totaling
$5,870,639  for  the  period  from  August 26, 2002 (inception) through June 30,
2004.  As of June 30, 2004, the Company has negative working capital of $45,272.
The  negative  working  capital  combined with the losses since inception raises
substantial  doubt  about  the Company's ability to continue as a going concern.
These  financial  statements  do  not  include  any  adjustments relating to the
recoverability  and  classification  of  recorded  asset amounts, or amounts and
classification  of  liabilities  that  might  be necessary should the Company be
unable  to  continue  as  a  going  concern.

Management plans to take the following steps that it hopes will be sufficient to
provide  Bluetorch  Inc.  with  the  ability  to  continue  in  existence:

                                     REVENUE

On  September  8, 2003, one of the Company's subsidiaries, Unboxed Distribution,
Inc.  ("Unboxed"), signed an agreement to license (with an option to purchase in
2006)  the Bluetorch trademark for apparel and certain other product categories.
Unboxed  began  limited  shipments to retail of Bluetorch branded apparel in the
first quarter of 2004 with a limited product line of domestically produced young
men's  embroidered  and/or  screened  t-shirts.

Bluetorch  Inc.  has  been working to acquire additional trade names. On October
21,  2003,  the  Company's  other  subsidiary,  Total  Sports Distribution, Inc.
("Total  Sports") finalized an agreement to license (with an option to purchase)
the  True  Skate  Apparel  ("TSABrand")  trademark.

Total  Sports  will also start generating revenue from apparel sales as a result
of  its  licensing  agreement  for  the Airwalk trademark. This agreement allows
Total  Sports  to  begin  shipping  to  retailers  starting  in  July  of  2004.

                                    FINANCING

On  June 19, 2003, Bluetorch Inc. filed an Offering Circular that authorized the
Company to raise up to $3,000,000 via sale of its common stock. Through June 25,
2004,  the  Company  has raised $2,267,057 against this limit. On June 24, 2004,
the  Company  filed  a  second  Offering Circular that authorizes the Company to
raise up to $5,000,000 via sale of its common stock. Subsequent to June 30, 2004
and through August 19, 2004, the Company has raised $115,000 against this limit.
These  sums  include  both  cash  proceeds  and  conversion of debt. This leaves
$4,885,000  that  Bluetorch  management  will continue to pursue from the equity
markets.

Management will also endeavor to utilize debt financing  (subsidiary receivables
and/or  inventory  financing)  to  create  additional  working  capital.

                                   CONCLUSION

Management  is  projecting  the  majority of 2004's revenue to be created in the
second  half  of  2004 due to the quadrupling of the collective product lines as
compared  to  the collective first half product line. Management is anticipating
that  the  cash  generated from the projected revenue, combined with cash raised
from  a  combination  of equity and debt financing, will allow Bluetorch and its
subsidiaries,  Unboxed  and Total Sports, to continue as a going concern through
December  31,  2004  and continue to grow their operations and revenues. Whereas
the Company believes it will be successful with its plans, due to market factors
and  economic  conditions,  no  assurance  can  be  given that financing will be
available  on  favorable  terms  or  at  all.

(2)  Investments

On  August  21,  2003,  the Company formed Unboxed for the purpose of owning and
operating  the  Bluetorch  license  agreement.

On  October  21, 2003, the Company formed Total Sports for the purpose of owning
and  operating  the  True  Skate  Apparel  brand  ("TSABrand)".

Unboxed  and  Total  Sports are wholly-owned subsidiaries ("Investments") of the
Company  and  are  focused  on  providing  apparel to the action sports markets,
including  surfing,  wakeboarding  and  skateboarding.  The  Investments plan to
develop high tech garments for athletes and participants in these sports as well
as designing more casual lifestyle clothing aimed at a wider range of consumers.
The  portfolio companies plan to begin manufacturing and marketing under various
brand  names and will market apparel to high end sporting goods stores, mid-tier
department  stores,  as  well  as  specialty  chains.  The TSABrand name will be
marketed to specialty shops and to high end sporting goods and specialty chains.

As  required  by the SEC's Accounting Series Release ("ASR") 118, the investment
committee  of the Company is required to assign a fair value to all investments.
To  comply  with  Section  2(a)(41)  of the Investment Company Act and Rule 2a-4
under the Investment Company Act, it is incumbent upon the board of directors to
satisfy  themselves  that  all  appropriate  factors  relevant  to  the value of
securities  for  which  market  quotations  are  not readily available have been
considered  and  to  determine  the method of arriving at the fair value of each
such security. To the extent considered necessary, the board may appoint persons
to  assist  them  in  the  determination  of  such value, and to make the actual
calculations  pursuant to the board's direction. The board must also, consistent
with  this responsibility, continuously review the appropriateness of the method
used in valuing each issue of security in the Company's portfolio. The directors
must  recognize  their  responsibilities  in this matter and, whenever technical
assistance  is requested from individuals who are not directors, the findings of
such individuals must be carefully reviewed by the directors in order to satisfy
themselves  that  the  resulting  valuations  are  fair.

No  single standard for determining "fair value in good faith" can be laid down,
since  fair  value  depends upon the circumstances of each individual case. As a
general  principle,  the  current  "fair  value" of an issue of securities being
valued  by  the board of directors would appear to be the amount which the owner
might  reasonably  expect  to receive for them upon their current sale. Methods,
which  are  in  accord  with  this  principle,  may,  for example, be based on a
multiple  of  earnings,  or  a  discount  from market of a similar freely traded
security,  or yield to maturity with respect to debt issues, or a combination of
these  and other methods. Some of the general factors which the directors should
consider in determining a valuation method for an individual issue of securities
include:
1) the fundamental analytical data relating to the investment; 2) the nature and
duration  of restrictions on disposition of the securities; and 3) an evaluation
of the forces which influence the market in which these securities are purchased
and  sold.  Among the more specific factors which are to be considered are: type
of  security,  financial  statements, cost at date of purchase, size of holding,
discount  from market value of unrestricted securities of the same class at time
of  purchase,  special  reports  prepared  by  analysis,  information  as to any
transactions  or  offers  with  respect  to  the  security,  existence of merger
proposals  or tender offers affecting the securities, price and extent of public
trading  in  similar securities of the issuer or comparable companies, and other
relevant  matters.

The  board  has  arrived  at the following valuation method for its investments.
Where  there  is not a readily available source for determining the market value
of  any  investment, either because the investment is not publicly traded, or is
thinly traded, and in absence of a recent appraisal, the value of the investment
shall  be  based  on  the  following  criteria:

1.  Total  amount  of  the Company's actual investment ("AI"). This amount shall
include  all  loans,  purchase  price of securities and fair value of securities
given  at  the  time  of  exchange.
2.  Total  revenues  for  the  preceding  twelve  months  ("R").
3.  Earnings  before  interest,  taxes  and  depreciation  ("EBITD")  .
4.  Estimate  of  likely  sale  price  of  investment  ("ESP").
5.  Net  assets  of  investment  ("NA").
6.  Likelihood  of  investment  generating  positive  returns  (going  concern).

The  estimated  value  of  each  investment  shall  be  determined  as  follows:

-  Where no or limited revenues or earnings are present, then the value shall be
the  greater  of the investment's a) net assets, b) estimated sales price, or c)
total  amount  of  actual  investment.
-  Where  revenues  and/or  earnings  are  present,  then the value shall be the
greater of one time (1x) revenues or three times (3x) earnings, plus the greater
of  the  net  assets  of  the  investment  or  the  total  amount  of the actual
investment.
-  Under  both  scenarios, the value of the investment shall be adjusted down if
there  is  a  reasonable expectation that the Company will not be able to recoup
the investment or if there is reasonable doubt about the investment's ability to
continue  as  a  going  concern.

The  Company's  board  of  directors  has  determined  the carrying value of its
Investment Portfolio, in accordance with the Company's valuation policy, at June
30, 2004 to be the actual investment. The investment Unboxed should be valued at
$843,573 at June 30, 2004, comprised of  the following: Warrants issued and cash
paid  to  acquire  the  licensing  rights  of $418,326 and $45,000 respectively,
inventory  of  $82,519, pre-paid expenses  $9,184 and advances from Bluetorch of
$288,544.

As  of  June 30, 2004, Total Sports has been valued at $317,481 comprised of the
following:  cash  paid  to acquire the licensing rights of $97,413, inventory of
$88,393,  trade show booths of $15,000, pre-paid expenses of $9,090 and advances
from  Bluetorch  of  $107,585.

(3)  Equity

During  the six months ended June 30, 2004, the Company issued 33,966,667 shares
of  common  stock  for  cash  per  its  Offering  Circular.

(4)  Restatement

Expenses  reported  in  the  statement  of operations for the three months ended
March  31,  2004  and  additional  paid  in capital were restated to reflect the
reversal  of stock market discount expense recorded on sale of common stock. The
effect  of  the  restatement  is  as  follows:

<TABLE>
<CAPTION>
<S>                              <C>                         <C>
                                   As  restated               As  reported
                                 ---------------             -------------
Additional  paid  in  capital    $     6,578,012             $  6,702,262
General  &  Administrative
  expenses                       $       271,463             $    395,713
Per  share                       $        (0.00)             $      (0.00)
</TABLE>

(5)  Subsequent  Events

EQUITY  TRANSACTIONS

Subsequent  to  June  30,  2004  and through Aug 19, 2004 the Company has issued
14,375,000  common  shares  in  exchange  for  $115,000.


ITEM  2:     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATIONS

This  information  statement  contains  forward-looking  statements.  For  this
purpose,  any  statements contained herein that are not statements of historical
fact  may be deemed to be forward-looking statements. These statements relate to
future  events  or  to  our future financial performance. In some cases, you can
identify  forward-looking  statements  by terminology such as "may," "predicts,"
"should,"  "expects,"  "plans,"  "anticipates,"  "believes,"  "estimates,"
"potential,"  or  "continue"  or  the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ  materially.  There  are  a number of factors that could cause our actual
results  to  differ  materially  from  these  indicated  by such forward-looking
statements.  These  factors  include  but are not limited to economic conditions
generally  and  in  the  industries  in  which  Bluetorch  Inc  may participate,
competition  within Bluetorch Inc.'s chosen industry, including competition from
much larger competitors, technological advances and failure by Bluetorch Inc. to
successfully  develop  business  relationships.

Although  we  believe  that  the  expectations  reflected in the forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  level  of
activity, performance or achievements. Moreover, we do not assume responsibility
for  the  accuracy  and  completeness of such forward-looking statements. We are
under  no duty to update any of the forward-looking statements after the date of
this  information  statement  to  conform such statements to actual results. The
foregoing  management's  discussion  and  analysis should be read in conjunction
with  the  Company's  financial  statements  and  the  notes  herein.

CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

Our  Management's  Discussion and Analysis of Financial Condition and Results of
Operations  section discusses our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires management to
make  estimates  and  assumptions that affect the reported amounts of assets and
liabilities  at the date of the financial statements and the reported amounts of
revenues  and  expenses  during  the  reporting  periods.  On an on-going basis,
management will evaluate its estimates and judgments, including those related to
revenue  recognition,  accrued expenses, financial operations, and contingencies
and  litigation.  Management will base its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the result of which form the basis for making judgments about
the  carrying  value of the assets and liabilities that are not readily apparent
from  other  sources.  Actual  results  may  differ  from  these estimates under
different  assumptions  or conditions. The most significant accounting estimates
inherent  in the preparation of our financial statements include estimates as to
the  appropriate  carrying value of certain assets and liabilities which are not
readily  apparent  from  other sources, such as the investments in our portfolio
companies  and  deferred  tax  asset  valuation.  These  accounting policies are
described  at relevant sections in this discussion and analysis and in the notes
to  the  financial  statements included in our quarterly report on Form 10-Q for
the quarter ended June 30, 2004.

LIQUIDITY  AND  CAPITAL  RESOURCES

We had cash totaling $35,354 as of June 30, 2004. Our other assets were security
deposits  of  $5,557  for the Company's headquarters in Cerritos, California and
investments  in portfolio companies of $1,161,054; total assets at June 30, 2004
were $1,236,049.  At June 30, 2004, our total liabilities of $86,183 represented
$58,025  of  accounts  payable  and  $28,158  of  accrued  payroll.

The  investments  in our portfolio companies increased from $559,405 at December
31,  2003  to  $1,161,054  at  June  30,  2004.  This  increase  was principally
attributed  to  additional royalty payments and further advances by the Company.

The  general  and administrative expenses have reduced considerably from 2003 to
2004,  due  to the 2003 numbers including start-up costs, larger salary expenses
and  significant  financing  expenses.

PLAN  OF  OPERATION  FOR  THE  NEXT  TWELVE  MONTHS

As  we  discussed  in our recent 10-K/A filing, 2003 was a year of restructuring
for  Bluetorch  Inc.,  including  the formation and investment in our subsidiary
companies.  Paramount  in  this  process  was  the  replacement  of the original
portfolio  of  brands  with  three  new  brands. As a result, we created Unboxed
Distribution,  Inc., which now wholesales and markets Bluetorch branded apparel.
Total  Sports  Distribution,  Inc.  was established to market and wholesale both
True  Skate  Apparel  (TSABrand)  and  Airwalk  branded  apparel.

Unboxed  shipped  its first Bluetorch apparel product of young men's t-shirts to
retailers  in  the  first  quarter of 2004. As a result, the number of Bluetorch
styles  available  for  shipment to retailers will more than triple in the third
and  fourth  quarters versus the first quarter of 2004. Unboxed anticipates that
this  will  generate  a  greater  volume  of  buying  per  retail  account.

Unboxed  had  net  sales  of  $1,485  in the first quarter with only young men's
t-shirts available for shipment. Unboxed opened and shipped to 3 retail accounts
in  the  first  quarter.  Unboxed had shipments of $432 in the second quarter of
2004  and had no order backlog as of June 30, 2004. The management of Unboxed is
forecasting  that  the majority of its net sales in 2004 will occur in the third
and  fourth  quarters  of  2004  and early 2005. This assumption is based on the
significantly  expanded product line and efforts to expand to mass retailers and
new  retailers  carrying  Bluetorch  apparel.

The third and fourth quarter revenues for Unboxed will also reflect a higher per
unit  wholesale  price  as the first quarter revenues were reliant on the lowest
wholesale  cost  product  (t-shirts).

Total  Sports generated no revenue and had no order backlog for the period ended
June  30,  2004.

The  licensing  agreement  for  Airwalk  apparel  allows  Total  Sports to begin
shipping  product  in  the  second  half  of 2004. We have forecasted Airwalk to
provide  the  majority of the revenue for 2004 out of the three brands presently
within  our  subsidiary  companies.

Given  that  the collective product lines of our two subsidiaries will more than
quadruple  (1st  quarter 2004 versus 2nd & 3rd quarters 2004), we are projecting
increases  in  collective  net  sales of our subsidiaries starting in the second
half  of 2004 and continuing into 2005. This assumption is also supported by the
additional  retail  accounts  projected  to  be  opened  by  both  subsidiaries.

The  Company  and  its investment portfolio companies, Unboxed and Total Sports,
are  continually  reviewing  their  brands  and  evaluating  the  most  positive
strategies  to  deliver these brands to the appropriate markets. As part of this
on-going  assessment,  management  has decided to slightly amend its strategy in
order  to achieve a more balanced mix of brands across the various market tiers.
It  is  expected  that  this  approach  may delay 2004 revenues but will provide
improved  sales  opportunities  for  2005.

Bluetorch  will continue to look for and possibly make additional investments in
new  brands  on  behalf  of  its  existing subsidiaries and/or any new potential
subsidiary  in  2004  and  beyond.

As  of  June  30,  2004,  the  Company  has not recognized any revenues from its
portfolio investments and for the six months ended June 30, 2004 has incurred an
operating  loss  of  $502,094. The loss represents expenses including payroll of
$128,694,  consulting  fees  for  investment  banking  and investor relations of
$101,412  and  professional  fees  incurred for legal and accounting services of
$65,479. Also included in the loss are interest and penalties of $50,000 related
to  the  retirement  of  260,000  shares  of  Preferred  Series  B  stock.

Failure  to  successfully  develop  our  portfolio  companies  would  hinder the
Company's  ability  to  increase  the  size  of our operations and realize asset
appreciation.  If  we  are  not able to generate additional revenues adequate to
cover  increased  operating  costs,  our  business  may  ultimately  fail.

We  have  cash  of $35,354 as of June 30, 2004. Subsequent to June 30, 2004, the
Company  received  proceeds  of $115,000 from the sale of its securities. In the
opinion  of  management,  available  cash  is  not  sufficient  to  fund current
operations. However, management believes that it can obtain adequate capital via
issuance  and  sale  of  its  securities.

ITEM  3.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

Our  business  activities  contain  elements  of risk. We consider the principal
types  of risk to be portfolio valuations and fluctuations in interest rates. We
consider  the  management  of  risk  essential  to  conducting  our  business.
Accordingly, our risk management systems and procedures are designed to identify
and analyze our risks, to set appropriate policies and limits and to continually
monitor  these  risks  and  limits  by  means  of  reliable  administrative  and
information  systems  and  other  policies  and  programs.

As  a  Business Development Company, we invest in illiquid securities, including
debt  and  equity  securities, of primarily private companies and non-investment
grade  CMBS. Our investments are generally subject to restrictions on resale and
generally  have no established trading market. We value substantially all of our
investments at fair value as policy. There is no single standard for determining
fair  value  in  good  faith.  As a result, determining fair value requires that
judgments  be  applied to the specific facts and circumstances of each portfolio
investment  while  employing  a  consistently  applied valuation process for the
types  of  investments.

We  determine  fair  value  to  be  the  amount for which an investment could be
exchanged  in  an  orderly  disposition over a reasonable period of time between
willing parties other than in a forced or liquidation sale. Our valuation policy
considers  the  fact  that  no  ready market exists for substantially all of the
securities  in  which  we  invest. Our valuation policy is intended to provide a
consistent basis for determining the fair value of the portfolio. We will record
unrealized  depreciation  on investments when we believe that an equity security
is  doubtful,  or  when  the  enterprise value of the company does not currently
support  the  cost  of our debt or equity investment. Conversely, we will record
unrealized  appreciation if we believe that the underlying portfolio company has
appreciated in value and, therefore, our equity security has also appreciated in
value.  The  values of the investments in public securities are determined using
quoted  market  prices  discounted for restrictions on resale. Without a readily
ascertainable market value and because of the inherent uncertainty of valuation,
the  fair  value  of  our  investments  determined in good faith by the board of
directors may differ significantly from the values that would have been used had
a  ready  market  existed  for  the  investments,  and  the differences could be
material.

In addition, the illiquidity of our investments may adversely affect our ability
to  dispose  of  debt  and  equity  securities at times when it may be otherwise
advantageous  for  us  to  liquidate  such  investments. In addition, if we were
forced to immediately liquidate some or all of the investments in the portfolio,
the  proceeds  of  such liquidation would be significantly less than the current
value  of  such  investments.

Because  we  may  borrow  money  to  make investments, our net investment income
before net realized and unrealized gains or losses, or net investment income, is
dependent  upon the difference between the rate at which we borrow funds and the
rate at which we invest these funds. As a result, there can be no assurance that
a  significant  change in market interest rates will not have a material adverse
effect  on  our  net investment income. In periods of rising interest rates, our
cost  of  funds would increase, which would reduce our net investment income. We
use  a  combination of long-term and short-term borrowings and equity capital to
finance  our  investing  activities.

ITEM  4.     CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

As  of  the  end  of  the  period  covered  by  this report, the Company's Chief
Executive  Officer  and the Chief Financial Officer carried out an evaluation of
the  effectiveness  of  the  design  and  operations of the Company's disclosure
controls  and  procedures.  The Company's disclosure controls and procedures are
designed  to  ensure that information required to be disclosed by the Company in
its  periodic  SEC  filings  is recorded, processed and reported within the time
periods  specified in the SEC's rules and forms. Based upon that evaluation, the
Chief  Executive  Officer  and  the  Chief  Financial Officer concluded that the
Company's disclosure controls and procedures are effective in alerting them on a
timely  basis to material information relating to the Company, as required to be
included  in  the  Company's  periodic  SEC  filings.

Effective  August  9,  Scott  Battenburg  has  resigned  his  position  as chief
financial  officer  and  our  Board of Directors has appointed Bernard Gurr. Mr.
Gurr  is  a Chartered Accountant from Australia having attended the Institute of
Chartered  Accountants  in Australia. Mr. Gurr began his career at Ernst & Young
in  Sydney.  From  1993 to 1994 he was the Director of Finance for World Cup USA
1994  Inc.,  the  organizing  body  behind the highly successful 1994 World Cup.

CHANGES  IN  INTERNAL  CONTROLS

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their  evaluation,  except  for  the  change  in  our  chief  financial officer.

PART  II:  OTHER  INFORMATION

ITEM  2:  CHANGES  IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

During  the  quarter  ended  June  30,  2004, the Company issued an aggregate of
16,800,000  shares  of  its  common  stock,  all  of  which were issued for cash
pursuant  to  an  Investment  Agreement  entered  into  in  October  2003.

ITEM  6:  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits.

None.

(b)  Reports  on  Form  8-K.

None.

SIGNATURES

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.

BLUETORCH  INC.



August  19,  2004                             By:/s/  Bruce  MacGregor
                                            ---------------------------
                                           Bruce  MacGregor,  President